Types of family businesses: Eternus?

Last week, we started unpacking the issue of the various types of family and family business combinations and their leadership dynamics. As you may have seen in family businesses, a lot of different problems can affect the growth of the family business, and most importantly, the continuity and survival of the business fall into understanding the underlying issues of the family that owns and controls the business. Before we talk about the structuring of ownership of the business, let us explore the leadership of the family business.

We are going to use available data and studies from counterparts in the family business services industry globally to form a picture of some of the challenges that face African family businesses. One such study is one done over several years on 21 German wine-business families by Sabine Rau, partner at Peter May Family Business Consulting. Sabine and her team found that family and family business combinations could be categorized into four basic types — “James Bond,” “Eternus,” “United,” and “Steward.” What they identified as unique about each type of family combination is that each makes different decisions, raises its next-generation differently, and ultimately engages in different succession processes, bringing about unique outcomes. Understanding the four different types may help develop a next-generation leader and ensure the continuity of your family business. And further examinations of these types and exploring the African Family Businesses further may help us identify and grow our businesses better.

I’m going to take the four different types of families and explore them in the context of our African landscape to see if we can identify these unique families within our communities, and possibly in ourselves as family business owners.

Last week we explored the James Bond type family. We identified the pros and cons of such families and organizations as well as some possible resolutions to take this family into a Multi-generational wealth organization. The second family business type we want to unpack is the:

Eternus Family Type:

The second type, like the James Bond type, is an authoritarian family leader who usually leaves the children’s upbringing and education to his wife. However, instead of focusing only on the business, he integrates the family into the business. He speaks openly about the business with other family members and leverages their talents in the business. He sees himself not only as the business leader, but also as the family leader. Because he involves selected family members in the business, he often develops potential successors, but his authoritarian style makes it hard to step away until the very end.

Eternus family leaders often fail to appoint a successor despite developing options, and the longer they remain in charge, the more their relationship with potential successors deteriorates. Successors who might have stepped up seek career satisfaction elsewhere, leaving the business to suffer from foregone entrepreneurial opportunities.

The definition of the word eternus is: eternal, everlasting, imperishable, having no beginning/end. Translated into this context, we can see that this implies that this family is being led by a leader who does not want to give up power and, at times, can be a micromanager even when he has given power to someone else. Although Ertenus families seem ideal when the business is initially established and running. Most businesses need the founder to be hands-on and interested in the day to day running. However, as the business matures and becomes more established, it is essential that the founder begins to trust the potential successors he has identified, and he/she starts taking a back seat role or an overseeing role where he does not actively interfere in the role of his appointed successor.

Although it may seem as if the founder is assisting and guiding the successor, other non-family members in the business may get confused when instructions or mandates come from two senior family/business members. This will, in turn, result in open conflict and the undermining of authority. The founder may not see a problem with this concept because he is, after all, the founder of the business. However, in reality, the non-family or family staff members may see it as a clear message that the successor has no real power or authority and they do not have to take instructions from them.

As in the case of Mbanje, the transport owner, he identified Tonderai his son, as his successor, yet he went on to make decisions like selling all the buses and going into the long-distance haulage industry without the consent or agreement of the successor. And although he invited Tonderai to come and work with him, he treated Tonderai with no respect, consistently telling him he was not performing well and utilizing him as an errand boy instead of harnessing his skills. This made his son frustrated and led him to want to focus on his career outside the family business.

Let’s have a quick look at the pros and cons of our Eternus family type in a table format for clarity:

A trusted advisor would be of great help to Eternus. An irony is that this family founder, leader, is, by his very nature, unlikely to listen to a trusted advisor despite the seemingly obvious advantages. Having a trusted advisor engaged with such a family could help manage rising trans-generational tensions and/or help bring the (competent) next-generation back once the patriarch finally steps down.

With the help of trusted advisors, these family firms might avoid endings similar to those of James Bond families. Similarly, advisors may also help with structuring the company’s governance and ownership structure in a way that the CEO will transitionally start seeing the benefits of collaboration and transition over dominance and overbearing leadership.

Tsitsi Mutendi is a co-founder of African Family Firms, an organization that aims to facilitate the continuity of African family businesses across generations. She is also the lead consultant at Nhaka Legacy Planning and the host of the Enterprising Families Podcast.